April 20, 2024

A Hedge Fund Manager’s Latest Bet: The Mets

But Mr. Einhorn — one of a handful of hedge fund managers followed by investors looking for the next smart play — insists that he spends far more time trolling through the bargain bin, looking for companies with potential that others have dismissed, then betting on their long-term revival.

On Thursday, in announcing that he has entered into exclusive negotiations to spend $200 million for a noncontrolling stake in the Mets, Mr. Einhorn, 42, may be making one of his most intriguing long-term bets yet.

The Mets, as their principal owner said in comments published this week, are lousy, snakebitten and bleeding cash, having lost $50 million last year alone. Attendance has plummeted at Citi Field, their expensive new ballpark in Queens. Perhaps most daunting, the trustee for the victims of Bernard L. Madoff’s Ponzi scheme has sued the team’s owners for $1 billion.

Mr. Einhorn did his best Thursday to sound like a friendly investor in a team very much in need of friends. He spoke fondly of dressing on Halloween as Dave Kingman, the face of the Mets during lean years three decades ago. He coaches his daughter’s Little League team. He said that he had, while growing up in Milwaukee, hit home runs into the backyard of the baseball commissioner, Bud Selig.

Mr. Einhorn emphasized that his investment in the Mets was not related to any of the $8 billion or so he manages at Greenlight Capital, his hedge fund. He sent an e-mail to investors to clarify the distinction and acknowledged that he understood that rehabilitating a troubled franchise would not be swift or easy.

“Baseball is a tough sport, and everyone wants to win more games,” said Mr. Einhorn, who would become one of a handful of financial moguls to own a professional sports team. “Over time, there is going to be losing seasons and tough seasons and winning seasons and hopefully championship seasons. I hope to experience all of those.”

 Forbes magazine values the Mets at $747 million, 13 percent less than last year. The true value of the team, though, will not be known until it is clear what percentage of the club Einhorn will get for his $200 million.

Despite the team’s problems, Mr. Einhorn’s proposed stake in the Mets — which must be completed with the team and approved by Major League Baseball — fits a pattern. He enjoys making money, and seems to enjoy almost as much crowing about how right his often blunt, often controversial investment analysis typically proves to be.

Indeed, he wrote a book detailing his prescience and some of the ills of the financial industry. It was titled, “Fooling Some of the People All of the Time.”

Mr. Einhorn does not seem to have the makeup of a hard-charging hedge fund manager. Mild-mannered, he speaks deliberately and softly. He was born in Demarest, N.J., and his family moved to Milwaukee when he was 7. He graduated from Cornell with a degree in government, not economics or business.

While many fund managers work well into the night, Mr. Einhorn is known to leave the office early enough to get home to Westchester for his daughter’s Little League games. He is active in several charities and, with his wife, Cheryl, set up a trust whose mission is to help people get along better.

But Mr. Einhorn also grew up in a financially minded home. His father is a banker who helps facilitate mergers and acquisitions. Mr. Einhorn helped found his hedge fund in 1996, when he was in his late 20s — a young age by industry standards — with less than a million dollars, much of which came from his parents.

He is a believer in so-called value investing, a strategy made famous by the likes of Warren E. Buffett (he once paid $250,000 to have lunch with the legendary investor), which holds that the best investments are made in good companies that are cheap. He will spend months reviewing a company’s financial information, searching for hidden value. He can then bet big, sometimes on the order of hundreds of millions.

Mr. Einhorn is fond of quoting Ken Griffey Jr. when talking about his investment style: “I don’t consider myself a home run hitter. But when I’m seeing the ball and hitting it hard, it will go out of the park.”

Like Mr. Buffett, Mr. Einhorn has a shrewd, quick mind, according to several hedge fund managers, skills that undoubtedly came in handy in 2006, when he entered the World Series of Poker as a relative novice in conventional gambling. He finished 18th out of 8,773 contestants.

His brand of poker is something of a metaphor for his style of business. Playing Texas Hold ’em, Mr. Einhorn told New York magazine in 2008, is about waiting for a chance to pounce, then pressing the advantage. “We make bigger bets every day,” he said of his day job. “There’s more at risk in what happens in Microsoft than I could ever bet on a poker table.”

His big bets and the economics of hedge funds help explain why he can afford to spend $200 million on a money-losing team. Hedge funds invest money for the wealthy as well as pension funds and other institutions.

Mr. Einhorn charges investors 1.5 percent to manage their money and 20 percent of any profits generated, investors in the fund say. Since its inception, his fund has returned 19 percent to investors on average per year.

While some hedge funds engage in campaigns to replace executives of the companies they own, Mr. Einhorn is often quiet when dissatisfied. But when he does go public, his words can move the markets. On Wednesday, Mr. Einhorn derided Steve Ballmer, the chief executive of Microsoft, as “stuck in the past” and suggested its board look to replace him. Mr. Einhorn owned about nine million shares of the company as of the end of March, according to a regulatory filing, worth about $200 million.

Since his comments, the shares are trading up about 2 percent.

His investment in the Mets may be more problematic. The team, run as a family business, has not had to acknowledge outsiders in the boardroom. Some smart people on Wall Street looked at the Mets’ books and walked away because the team refused to sell part of its share in SNY, its profitable cable network. Mr. Einhorn has decided to pay only for shares in the team.

The decision has some investors wondering whether he sees an angle no one else discovered.

“He’s a value guy,” said Anthony Scaramucci, a managing partner at the investment firm SkyBridge Capital, who was part of another group that looked to buy part of the Mets. “So you’d have to look at this as a growth opportunity and hold your nose and eyes for 10 years.”

Peter Lattman contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=be4fffd340521a62b79455df14f2e626

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